New Year – New vacation credit

On the fundamental question: Who determines when vacation are to be taken?

Employers are entitled by law to determine the period of time in which vacation need to be taken. However, employers are not entirely free in setting such period. Rather, it must be determined with regard to the employees’ wishes, provided these do not interfere with the employers’ needs. In practical terms, this open wording means that employers can only refuse employees’ requests for a specific period if there are sufficient reasons for doing so (e.g., high production capacity utilisation or a shortage of personnel). Also, the employers may only direct the employees to take vacation in a specific period with sufficient reasons (e.g. bad order situation or annual closing). Moreover, the employers must furthermore ensure that the employee receives the corresponding direction at least three months before the respective period of the directed vacation. In addition, the employers need to make sure that at least two connected weeks of vacation must be granted per year.

A vacation period agreed upon or directed by the employer may only be unilaterally rescheduled by the employer if this is done well ahead of the agreed period and if such rescheduling is justified by current company interests that outweigh the interests of the respective employee. A call-back from ongoing vacation is only justified in exceptional cases. In both cases, directed rescheduling and call back, the employers must bear the costs resulting for the employee.

The result of non-compliance with these requirements may be that the employer is not entitled to terminate the employment without notice if the employee refuses to comply with his direction (i.e. the employee does not return to work if called back from holiday or does not reschedule his vacation). Only if the employer complies with these requirements and the employee nevertheless takes leave can dismissal without notice be lawful / justified. If the employee refuses to take ordered vacation despite the employer’s legitimate interests, the employer may reject any offer to work from the employee and reduce the vacation credit accordingly.

Can a vacation credit be transferred or does it expire at the end of the calendar year?

In principle, the vacation credit is to be taken in full each year. If the employee joins or leaves the company during the year, the vacation must be granted pro rata. If the vacation cannot be taken in full in one year, the employee does not lose the remaining credit. Any contractual clause to the contrary would be invalid. Usually, employers carry forward the vacation credit of employees from the previous year to the following year. However, it should be noted that vacation is also subject to the statute of limitations. Vacation credits get time barred five years after their due date.

May holidays be reduced in case of illness?

A reduction of the vacation credit is only permitted from the second full month of incapacity for work. If the employee is ill for less than one month, the vacation credit must not be reduced. If the employee is absent for the second full month due to illness, the vacation credit may be reduced by 1/12. A further reduction of 1/12 may be made for each additional full month of absence. If the employee is not absent for another full month of illness, no (further) reduction is allowed.

Can the vacation credit be paid out?

To satisfy the purpose of vacation, the recreation of employees, vacation claim must not be compensated by monetary benefits during the employment. Special attention should be paid to the widespread wage supplements for vacation compensation (e.g. 4 vacation weeks = 8.33 % wage supplement). These are only permitted in exceptional cases. E.g. if the calculation of the vacation pay is difficult due to irregular working hours or if the employment is of very short duration. In addition thereto, formal requirements must be met by the employer. If these requirements are not met, the employer is at risk of double payment.

Even in the case of a terminated employment, the vacation must basically be taken in kind. If the employee has been terminated by the employer, a direction to take vacation during the notice period is permissible to the extent that the employee does not need to look for a new job during the notice period and therefore is unable to take vacation. In addition, the aforementioned period of notice must also be observed in the case of a terminated employment, although in case of a terminated employment it may be shorter than in case of an unterminated employment. If the vacation cannot be taken until the end of the employment (for whatever reason), the employer must pay out the remaining vacation credit. If the employee is released from his duty to work after the notice of termination has been filed (Garden Leave), one third of the Garden Leave may be credited to the vacation balance, or the vacation balance may be compensated to the corresponding extent with the Garden Leave. The uncompensated vacation balance must be paid out.

Our specialists in employment law, Philipp Bachmann and Simon Fricker, are at your disposal for further information.